We have previously characterized a family of genetically distinctive endogenous retrovirus-like elements which are present in multiple copies in the mouse and other rodent genomes. The bulk of the intracisternal A-particle (IAP) gene family in Mus musculus consists of 7.2 kb long elements. Deleted forms of these elements have also been described, and the majority of IAP sequences involved in transpositions have been deleted forms. We are now studying a particular subset of deleted IAP genes designated type II IAP genes which are characterized by an insertion (IIins). Clones containing IIins sequences were isolated from a mouse genomic DNA library. Eleven such clones also reacted with type I IAP sequences, suggesting most IIins sequences in the genome occur as parts of type II IAP genes. The IIins sequences are interspersed and are absent or not amplified outside Mus musculus and closely related species. The IIins is 300 bp long and shows 10% divergence among three members sequenced. Type II IAP genes have at their 5' end a region of 74 bp which is duplicated and contains a core enhancer sequence. IIins begin and end at precisely the same point in two subclasses of type II IAP genes, making it likely they derived from a common progenitor. Formation of type II IAP genes probably involved multiple recombinational events. The majority of type II IAP genes appear to be associated with other repeats. Specifically, 11 of 12 type II IAP clones also contained truncated L1 family members. Only 3 of 29 type I IAP clones contained these repeats. Major transcripts of IIins were associated with IAP sequences. Only the type IIA and IIB IAP genes were transcribed. The lack of type IIC gene transcription may result from their association with the L1 repeats which are highly methylated and poorly transcribed. An inhibitory effect of flanking DNA on provirus transcription has been noted by others.